Statement 12: Trends in Public Sector Finances

This Statement addresses recent trends in the fiscal balance, cash surplus, and balance sheet data (net debt, net worth and net interest payments) for the Commonwealth and State/local levels of government along with the consolidated non-financial public sector. These measures are discussed in greater detail in Statement 8, Financial Reporting Standards and Budget Concepts.

This Statement provides a broader context in which to consider developments in the Commonwealth's Budget.

For further information on the data used in the charts and tables in this section see Appendix B: Data.

Size and structure of the public sector

The public sector constitutes over 20 per cent of the Australian economy. The size and structure of Australia's public sector provides important context for interpreting the trends in this sector.

Chart 1: Contribution of public and private sectors

Domestic demand, December 2002	Employment, December 2002

Source: ABS Cat. No. 6248.0, 6202.0 and 5206.0.

There are significant differences in the roles and responsibilities of the two main levels of government. Major Commonwealth expenses include transfer payments in relation to social security and welfare and defence expenditure. Transfer payments - for example, Commonwealth income support payments - are not included in public final demand. Payments that the Commonwealth makes to the States and the private sector - to assist in funding important services like education and health - are reflected in either State/local public final demand or household final demand. The Commonwealth therefore constitutes only 38 per cent of public final demand while the State/local level accounts for 62 per cent of public final demand, equivalent to over 13 per cent of final domestic demand as shown in Chart 1.

The public sector directly accounts for around 16 per cent of wage and salary earners, also shown in Chart 1. The State/local sector accounts for 84 per cent of total public sector wage and salary earners and 13 per cent of all wage and salary earners, reflecting its major responsibilities for service delivery in the areas of education, health, transport and public order and safety.